Return Trends At G-III Apparel Group (NASDAQ:GIII) Aren't Appealing

What are the early trends we should look for to identify a stock that could multiply in value over the long term? In a perfect world, we'd like to see a company investing more capital into its business and ideally the returns earned from that capital are also increasing. Ultimately, this demonstrates that it's a business that is reinvesting profits at increasing rates of return. In light of that, when we looked at G-III Apparel Group (NASDAQ:GIII) and its ROCE trend, we weren't exactly thrilled.

What Is Return On Capital Employed (ROCE)?

Just to clarify if you're unsure, ROCE is a metric for evaluating how much pre-tax income (in percentage terms) a company earns on the capital invested in its business. The formula for this calculation on G-III Apparel Group is:

Return on Capital Employed = Earnings Before Interest and Tax (EBIT) ÷ (Total Assets - Current Liabilities)

0.14 = US$298m ÷ (US$2.7b - US$546m) (Based on the trailing twelve months to July 2024).

Thus, G-III Apparel Group has an ROCE of 14%. That's a relatively normal return on capital, and it's around the 13% generated by the Luxury industry.

View our latest analysis for G-III Apparel Group

Above you can see how the current ROCE for G-III Apparel Group compares to its prior returns on capital, but there's only so much you can tell from the past. If you'd like, you can check out the forecasts from the analysts covering G-III Apparel Group for free.

So How Is G-III Apparel Group's ROCE Trending?

Things have been pretty stable at G-III Apparel Group, with its capital employed and returns on that capital staying somewhat the same for the last five years. Businesses with these traits tend to be mature and steady operations because they're past the growth phase. So don't be surprised if G-III Apparel Group doesn't end up being a multi-bagger in a few years time.

What We Can Learn From G-III Apparel Group's ROCE

We can conclude that in regards to G-III Apparel Group's returns on capital employed and the trends, there isn't much change to report on. And investors may be recognizing these trends since the stock has only returned a total of 26% to shareholders over the last five years. As a result, if you're hunting for a multi-bagger, we think you'd have more luck elsewhere.

One more thing to note, we've identified 1 warning sign with G-III Apparel Group and understanding it should be part of your investment process.

For those who like to invest in solid companies, check out this free list of companies with solid balance sheets and high returns on equity.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.